The market is sizzling, and it could kick up to another level if there were just more homes to sell! Here is a comparison of today’s inventory to previous years (the lower-end is selling fast!):
NSDCC Active Inventory – Second Week of April
Year
$0-$800K
$800K-$1400K
$1400-$2400K
$2400K+
Total
2014
97
233
233
349
912
2015
65
220
218
346
849
2016
37
235
260
447
979
2017
28
168
235
386
817
NSDCC Pendings Today
PEND
$0-$800K
$800K-$1.4M
$1.4M-$2.4M
$2.4M+
Total
4/10/17
38
202
126
69
427
Without more homes to sell, it’s like a freeze-dried frenzy on the lower end – very dry but it’ll keep you alive!
Anyone eager to buy a home this spring probably has reasons to feel good. The job market is solid. Average pay is rising. And mortgage rates, even after edging up of late, are still near historic lows.
And then there’s the bad news: Just try to find a house.
The national supply of homes for sale hasn’t been this thin in nearly 20 years. And over the past year, the steepest drop in supply has occurred among homes that are typically most affordable for first-time buyers and in markets where prices have risen sharply.
In markets like San Diego, Boston and Seattle, competition for a dwindling supply has escalated along with pressure to offer more money and accept less favorable terms.
“Sellers will have the edge again this year,” said Ralph McLaughlin, chief economist for Trulia, a real estate data provider. “Homebuyers are really going to be scraping the bottom of the barrel as far as housing choice is concerned.”
The intensity of the competition this spring has surprised even sellers like Kathleen Mulcahy, a 37-year-old product manager in Seattle.
Within a week of listing her one-bedroom, one-bath condo, Mulcahy received 21 offers – all above her asking price of $398,000. Most of the offers came with built-in triggers to automatically rise in case a rival bidder sweetened a bid. In the end, she accepted an offer of $500,000 – all cash.
“A lot more than I expected,” Mulcahy said.
Yet the changed landscape cuts both ways: Facing higher prices and competition herself, Mulcahy has decided for now to put off buying another home.
“There’s very little available, and it’s just too expensive right now, so I’m going to wait,” she said. “I’ll probably rent for two or three years.”
About 1.75 million homes were for sale nationally at the end of February, according to the National Association of Realtors. That’s down 6.4 percent from a year earlier and only slightly up from January, when listings reached their lowest point since the association began tracking them in 1999. All told, the supply of homes for sale has fallen on an annual basis for the past 21 months.
Another entity that had to radically change their business when banks stopped foreclosing was Foreclosure Radar. Their product line has expanded to appeal to the masses, and they’ve kept their market reports coming:
“News of soaring prices amidst weak sales is fueling speculation that the San Francisco Bay Area housing market is a housing bubble about to pop,” said Schnapp. “It’s not a housing bubble. It’s a market dislocation caused largely by government policy.”
“A housing bubble requires both an unwarranted surge in prices followed by a massive selloff,” said Schnapp. “Today’s high prices are due to a combination of factors. Demand is being fueled by market stimulus in the form plentiful jobs and government-backed low-interest, below market rate loans that require little down. Supply constraints are coming from burdensome regulations on new building.
A massive selloff — a housing bubble bursting — is unlikely because a regulatory change in 2009 means that even if consumers default on their loans, banks will now sit on inventory rather than foreclose and sell like they did in 2008.”
“California’s housing problem boils down to bad government policy. Local, state and federal housing regulations have made it all but impossible for builders to meet housing demand in California’s growing economy,” said Schnapp. “Conceptually the solutions to California’s affordability crisis are simple, but politicallywe should expect the current situation to continue for the foreseeable future.”
The only thing harder than getting a listing is helping buyers win a house.
Last week I mentioned how there still isn’t any uniform process to sell a residential resale home – it is the wild wild west! Even when a listing agent tells you what they are going to do to you, it is always subject to change!
We found this fantastic video by a Colorado guy who outlines the best ways to handle a bidding war. Because I know that hardly any agents actually have a bidding-war strategy beyond spreading out the offers on the dining-room table, I have since been sending the video along with my offers. Because the video is done by a third-party guy, hopefully it is viewed as a powerful new solution by agents who tend to think they know it all just because they’ve sold a few houses in their life.
Here are my results:
The first listing agent who saw it took it well – he was the guy who asked if I utilize the same method (which I affirmed), and then proceeded to at least tell me what the other offers were. They were too high for us, so my buyers surrendered.
The next try was to send the video along with our full-price offer (different buyers) into what we knew was going to be a dog fight. There were at least 50-70 people at the open house when we were there, and the older house oozed with charm and character. The listing agent insisted that to present our offer, we first had to state in writing that we would not ask for any repairs. I replied that I’ve never heard that one before, but we complied just to see how crazy it would get. She didn’t respond to my second inquiry on whether she watched the bidding-war video. She said they would pick a winner on Monday, which came and went with no seller response. On Tuesday, she emails the buyer-agents stating that she had double-digit offers, and wanted everyone to submit their highest-and-best offer. Obviously she didn’t watch the video – in which he compared her strategy as being the same as telling race drivers to just keep circling the track and we’ll tell you when the race is over. My buyers loved the house on Saturday, but by Tuesday were fed up and we didn’t respond further.
On Monday afternoon a new listing hit the MLS which looked like a good match for a third set of buyers, and we were there on Tuesday morning to view. It met our criteria, and we knew it was hot, so we made a full-price offer that day with no appraisal contingency, no termite, no home warranty, and a month’s free rentback for the sellers if they needed it. The next morning, the listing agent said he had received four offers in the first 24 hours – and ours was the lowest! He watched the video but it was too late – the sellers had already signed the offer that was $50,000 over list.
Wouldn’t every party be better served if there was a uniform process?
Wouldn’t a live auction be the best solution for sellers and buyers? It would take all the uncertainty out of the equation, and allow all bidders to compete face-to-face, and be driven by the animal spirits to pay what it took to win!
A side note, and fourth example: Buyers who are moving here from out-of-state put their current multi-million-dollar home on the market last week in a town that has had a similar frenzy environment as San Diego. They were impressed with the immediate buyer traffic, and on Sunday an agent reported that he had a buyer who wanted to make an offer. He, like me and every other buyer’s agent, was inquiring how the listing agent was going to handle the process, to which she responded, “We’ll be reviewing all offers on Wednesday”. The buyer didn’t like that response, and went away. Here we are on Thursday, and no offers have been received.
While I need to keep getting listings just to maintain my own sanity, I will always have time for buyers who are blog readers here! Congrats to our frequent commenter Eddie89! We made offers on five houses before finally succeeding on the sixth. We offered 9% under list price – a daring low offer on a new listing – and when the sellers countered 3% below list it was close enough – we’re in escrow!
An online auction to sell real estate? Maybe it will catch on!
Gone are the days of the quick talking auctioneer, paddles and shouted bids. Today, San Diego County Treasurer-Tax Collector Dan McAllister announced he is moving the annual property tax sale auction online.
“With this new system, people sitting at home can browse and bid on more than 1,600 properties currently available, including timeshares starting at $900,” said McAllister. “The online auction aligns with our ‘e-nitiative’ to make it easier and more efficient to do all business with us electronically.”
The online tax sale auction will take place May 5-10. Interested buyers can register as a bidder beginning April 5, and registration will end April 27. Bidders must put up a $1,000 advance and a nonrefundable $35 bid processing fee.
“Moving this tax sale online will cut our operation costs compared to a live auction,” said McAllister. “We also hope to sell more properties as we open the auction up to bidders outside the San Diego region – even around the world.”
All sales are final, so this is a buyer beware sale. Before April, the Treasurer-Tax Collector’s Office (TTC) encourages everyone to research the selection of available properties by clicking here.
Right now, there are about 1,600 parcels available, roughly four times the number we have put up for auction in previous years. The majority – 1,231 – are timeshares, many with minimum bids as low as $900.
The remaining 393 parcels are improved and unimproved properties, 39 of which have owners living in them. Owners of the for-sale properties can redeem them by paying owed taxes and fees until 5 p.m. on May 4. Over the past five years, TTC notices and late bills to these owners have not been responded to. In early April, each of the properties will be personally contacted by TTC staff who will warn them of the impending sale.
The TTC has not held a tax sale auction since 2015, and on average, sales have generated more than $1.1 million each year.
We hear about the ‘tight inventory’ across the country, but the perception is affected by how fast homes are selling – there aren’t many houses just sitting around not selling, which gives the appearance of ‘tight’.
Let’s measure it correctly by comparing the total number of houses listed for sale between La Jolla and Carlsbad:
NSDCC Total 1st Quarter Listings
1st Qtr
Total # of New Listings
Median List Price
2013
1,288
$1,175,000
2014
1,235
$1,289,950
2015
1,276
$1,302,950
2016
1,394
$1,490,000
2017
1,223
$1,495,000
The number of NSDCC houses listed for sale hasn’t dropped significantly from previous 1Qs – the 1,223 is only 4% below the average of the last five years. Does that mean the number of sales should be comparable to previous years?
Here is the first look at last month’s NSDCC detached-home sales:
NSDCC March Sales
March
Total # of Sales
Median SP
Avg. $$/sf
Avg. DOM
# Sold <800K
2013
299
$840,000
$404/sf
49
129
2014
219
$1,040,000
$518/sf
51
62
2015
294
$1,137,500
$502/sf
46
73
2016
245
$1,145,000
$524/sf
42
57
2017
229
$1,110,000
$481/sf
42
41
Sales last month were 11% below the March average of the last five years. Double-digit changes should get our attention! But it is very understandable, once we look deeper.
The lower-end is where the discrepancy is – the number of houses sold under $800,000 last month was 44% below the 5-year average.
The lower-end market is disappearing.
We’re already a higher-end market, and going higher. As a result, sales could taper off as we find an equilibrium.
It’s not like there aren’t houses for sale. They’re just expensive!
Today we have 822 on the market between La Jolla and Carlsbad – with a median LP of $2,295,000! Only 97 of those (12%) are listed under $1,000,000!
One other note. The $524/sf average last March included this house that closed for a whopping $5,869/sf. Take that out, and the March, 2016 average is $502/sf, the same as the previous year.
Here are stats on the 99 NSDCC houses sold between March 1 and March 15th – these are the years when the sellers purchased the home they sold:
Year Purchased
12/12/15
3/19/16
6/18/16
12/13/16
4/3/17
0 – 2003
41%
42%
39%
57%
48%
2004 – 2008
23%
29%
24%
19%
15%
2009 – 2011
15%
11%
13%
6%
7%
2012 – 2016
18%
18%
19%
13%
25%
New Homes
2%
1%
5%
4%
4%
With roughly half the homes being owned by the sellers for at least 13-14 years, buyers can expect to do some repairs and improvements! It is interesting to note that 25% of the sellers were recent purchasers too. Is that a group consisting of divorces and move-up buyers?
More stats:
Other Categories
12/12/15
3/19/16
6/18/16
12/13/16
4/3/17
Number of Sales
125
114
144
112
99
Avg. $$/sf
$505/sf
$552/sf
$550/sf
$529/sf
$481/sf
Median SP
$1,080,000
$1,129,000
$1,291,500
$1,274,500
$1,110,000
Avg DOM
60
38
42
54
43
Sold in 0-10 Days
24%
32%
35%
28%
45%
Lost $$
11
3
7
7
0
DOM = 0
5
8
7
2
4
I don’t get worked up about the pricing stats – every group of houses is different, and the stats are going to bounce around. Other notable items:
Of the 99 sales, 24% of the buyers paid cash.
The median days-on-market was 13 days.
No sellers sold for less than they paid!
This is probably how the boomer liquidation will occur – one by one.
We have a new Instagram account to which both of us are contributing. Kayla noted that she got more followers to this account in one weekend than I’ve added to mine in 2+ years:
